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Telecom Mergers Good For Competition: Study

Telecommunication industry consolidation will be good for competition, according to study by a George Mason University economist.

In "Verizon and MCI: A Merger that Promotes Competition," Richard E. Wagner, Harris Professor of Economics at GMU, writes that the merger of MCI and Verizon, and of regional Bell operating companies (RBOCs) and their long-distance competitors generally, will allow the merged companies to deliver a higher level of value and service to consumers. According to Wagner, the mergers "is an illustration of the competitive effort to provide valuable service in the presence of the striking technological changes that have rendered obsolete some long-standing notions about market boundaries."

Indeed, Wagner points out that the technological landscape has changed dramatically since AT&T split into seven RBOCs and one long-distance carrier in 1984. As the telecommunications technology has blurred the distinctions between telephony data communications and television, the potential for monopoly by large merged telecommunications has been greatly reduced. Control of the landline infrastructure "is no longer an instrument of monopolization." Wagner says.

Moreover, new carrier technologies, like wireless, have made restrictions based on the landline infrastructure pointless, while they hold back industry expansion. "In short," Wagner writes, "measures of concentration based on shares of wire-based connections are obsolete, as technological competition has changed the commercial landscape dramatically."